This is exciting because there will finally be some action on what is one of the few remaining wholly owned hotel properties by Starwood Hotels. (Starwood has been ridding themselves of owned properties and focusing on franchising and management). The original plans from 2007 called for an Element, Aloft and a Four Points hotel to be built on the property. It was thought that the Westin would be converted to an Element, the Clarion would be torn down and replaced with an Aloft and the Four Points. In that time frame we’ve seen the Westin stay as-is and the Clarion renew their franchise agreement. Starting on July 26th, 2011, the Clarion property will permanently close and construction will commence a few weeks later for a complete renovation and conversion into an Aloft hotel, without tearing down the building and starting from scratch.

And that’s only the first phase of the project:

I found a story in the San Mateo Daily Journal which details that the second phase will consist of a 160 room Element hotel on the property next to the aloft. The Daily Journal article also shed some light into Starwood’s original 2007 plans for the property; the Clarion was to be torn down and replaced by three hotels – an Element, Aloft and Four Points, leaving the Westin alone.

Not only that but in the Millbrae, CA Planning Commission’s Meeting Minutes are extensive discussions about the size of the signs for both an Aloft and Element.

So how will Starwood fit two hotels into a piece of land that currently holds one hotel? The Clarion included banquet hall space, and had a very large backyard/pool area. I can see the banquet space and perhaps even part of the existing hotel near the main entrance getting demolished and the pool/outside area to be shared by the Element and Aloft – much like Starwood’s Aloft & Element in Lexington, MA.

It’s good to see Starwood making an investment into this property. The Clarion has been needing some TLC for awhile now, and Starwood has been itching to make this another prime property of what their concepts are capable of.

andrew@alconic-inc.com

One thing that drives me crazy though is being at the scene of the event and taking away a completely different picture of the event than is reported in the media (I’ve experienced this NUMEROUS times with my local home town newspaper) and what amazes me is how often the media takes things out of context, or instead of following the straight road makes a sharp left (not politically ”left”).

A perfect example of this is the recent news of Ivanka Trump’s “interest” in purchasing/developing Rat Island in NYC.

Most people have never heard of Rat Island – and for a good reason, its a two-acre (I think thats being generous) rock formation that juts out of the water on the Long Island Sound, east of Pelham Bay.

Here’s a Google Map of the location:

View Larger Map

It has no power, water, nor even a dock to tie your boat up too. Lastly, in high tide most of it is underwater – if there is a storm, it’s completely underwater.

But back to my story:

Of all news organizations, the Wall Street Journal is not one I would expect to hop on this bandwagon, but last week, in an article in the Metropolis section, “A blog of reporting and news from New York City” they did just that. Now, granted, it’s not the Print Version, but this story did make the frontpage of WSJ.com which is how I found out about it.

The story says:

Talk turned to pungently named 2.5-acre piece of land, “off the coast of the Bronx,” according to a real estate listing, going up for auction October 2. Trump was not too familar with Rat Island before this reporter explained it. (“I first thought you meant Necker Island,” she said. “Richard Branson’s.”)

“Rat Island sounds really interesting,” she said, when we asked whether she’d buy it and develop it under the Trump banner. “But there’s not a lot that’s undiscovered in the tri-state area. So when there is, there’s usually a reason why it’s undiscovered.”

She stated she never heard of it before, thought the island sounded “interesting” (who wouldn’t think that – a 2 acre island for sale in the middle of the Long Island Sound?!), but then stated – if there is an undiscovered area, there must be a reason its “undiscovered” in other words – she is smart and realizes that there must be something wrong with it if there is no development on it.

And she is exactly 100% right.

But the media had a field day! If you just read the headlines you’d think she found the greatest site for the next Trump project, or was seriously considering it for a future project:

Is Ivanka Trump A Buyer for NYC’s Rat Island? – Private Island News

Ivanka Trump Mulls Rat Island Purchase – The Real Deal

Trump on Rat Island? – Metro NYC

Obviously no true “news of record” wrote an article about it (except, well.. The Wall Street Journal), in fact the NY Times, and CBS New York wrote about the island, but didn’t mention anything about Ivanka, but it’s still worth mentioning how the smallest bit of news – even if it isn’t news, can easily be taken out of context and made into something that is “newsworthy”, without even checking the facts, or taking a step or two back and thinking about what the story is actually about.

andrew@alconic-inc.com

It’s a great move for Parkway Corp – the current owner of the land who operates a public parking lot on the site now. Previously the W Philadelphia was to be built by a company called Urban Residential (ironically, they still have the project listed on their website) “on land controlled by Parkway Corporation” in other words, Urban Residential was going to be operating the W on a land lease, with Parkway still owning the land. Now, with the Home2 Suites, Parkway Corporation will stand to make more money as they will be the owner of the hotel, instead of just a landlord.

Back in 2008 I spoke to Stephen Starr, owner of Starr Restaurants, who was supposed to open a restaurant in the W Philadelphia; at the time he told me he hadn’t heard from the W people in months and thought the project was dead – but no official word was ever made as to the status of the W Hotel project. Eventually it was assumed to be a cancelled project, but there was always hope that another developer may come along and build the W as planned.

Let’s do a comparison between the two projects:

W Hotel Philadelphia (2006)	vs	Home2 Suites (2011)
29	Stories	8
250	Rooms	246 (all suites w/ kitchens)
95	Residences	0
11,000 sq ft	Meeting Space	2,000 sq ft
Bliss Spa	Spa/Fitness Center	Pool/Fitness Center
?	Parking Garage	860 Spaces
$150,000,000	Estimated Construction Cost	$60,000,000

I have no doubt that this project will be built and will be opened as planned in summer 2013 – smaller projects, vs high end boutique projects are being built at a much faster rate in the current economy, plus its location – directly across from the Philadelphia Convention Center is a great location for an extended stay hotel.

andrew@alconic-inc.com

There is no information on branding of the property – which is of special interest to those who follow Starwood Capital & Barry Sternlicht – so no word on if it will be a “Sternlicht inspired” hotel (eg – 1Hotel or Baccarat),or if it will be a Hyatt or other established brand. But they did have a picture, and some basic facts – 340,000 sq ft, 120 key 5-star hotel, and another 140,000 sqft of residential with hotel amenities.

It’s difficult to tell just by the appearance of the building – but it does show a few elements which could be unique – an outside pool deck area mid-building and a grassy/tree-filled terrace on the upper third of the building as well.

Starwood Capital’s Other NYC Hotel Projects

HotelNewsNow.com reported that Barry Sternlicht recently stated that he has three hotel projects currently on the drawing board in NYC: The Donnell/Tribeca Associates project mentioned above, the conversion of 1414 Ave of the Americas, and another unannounced project that he’s keeping close to the vest. Once again, there is no word or indication as to the brands of these hotels – will they be Starwood Capital brands, or will they be branded with other well established luxury brands?

I’m thinking that these projects will be some type of new or unique brand to Starwood Capital because typically they will not make a big deal in the press or market about “just another hotel transaction”. I’m sure we’ll find out one way or another over the next few months.

andrew@alconic-inc.com

Yep.

A kitchen vent.

Makes sense though, Conde Nast is famous for their cafeteria, much has been written about it, the food is excellent, the patrons are the creme de la creme of the publishing world and the architecture and design of the place is out of this world. Plus, since this vent will also be used for Conde Nast’s test kitchens as well as the cafeteria, it’s big – one story high and 25 feet wide.

I had heard a quick blurb about the vents being a potential deal breaker, but the NY Post had a great story on it recently which shed some more light on the issue.

Not to worry, the vent won’t appear as an eyesore similar to the vents on the side of the Borgata in Atlantic City, or the Goldman Sachs Tower in Jersey City – this vent is costing $1 million, including specially designed glass panels which help to disguise it’s appearance. From how the article sounds, it’s going to be difficult to tell its even there unless you know what you’re looking at, and it’s going to be on the North Side, not the Southern Side which faces the WTC Memorial and the rest of Ground Zero.

Just goes to show how what may seem to be the most inconsequential item on a tenant build-out can end up being a major deal breaker.

andrew@alconic-inc.com

The Wall Street Journal had a story today on how Apple’s mall stores are beginning to act almost as anchor stores in shopping centers, much like Department Stores are expected to be the major draw for a mall. In a lot of malls, the little 4-6,000 sq ft Apple Store is bringing in more visitors (and revenue) than the 100,000 sq ft Macy’s or Nordstrom’s. The issue it is causing is the huge disparity in revenue per square foot vs rent per square foot.

Now, I’m no expert in Retail Shopping Center leasing terms, so I could be off on a few points – please correct me if so..

According to the WSJ article, the average Apple store pays about $480,000 a year in rent – working out to $80 p/sf a year for a 6,000 sqft store, whereas a JCPenny’s store  pays on average $439,000 a year in rent; with a 100,000 sqft store that means a store like JCPenny’s pays only $4.39 a square foot! Another comparison can be for revenue, the average Apple store makes $34.1 million a year, whereas JCPenny’s makes $16.1 million a year. One point the article doesn’t make is the percentage of revenues that malls get in addition to rent – or if that is already factored into numbers provided.

Sure, you can argue it’s like comparing a Brookstone to Radio Shack; the average receipt at an Apple store skews much higher in the $1,000 even $2,000 range compared to the majority of purchases at department stores of a few hundred – if that after all the promotions and sales that always seem to be occuring.

With the draw that the Apple Stores have, it’s not inconceivable that Apple may start asking for allowances that the typical in-line mall retail store would never consider; such as billing on the Mall’s outside facade or directional signs throughout the parking lots, significant rent/tenant improvement allowances, or prime space that would typically go to another non-anchor tenant that has much larger space requirements.

It puts mall landlords in an unenviable position that will hurt a lot of egos, since this small store is beginning to have such an impact on the overall traffic of the mall, the scales are starting to tip in favor of the small guy in the mall compared to the past where the department stores were always the big guy. Apple is a smart company – it’s only a matter of time before they will start taking advantage (and rightly so) of their growing popularity.

andrew@alconic-inc.com

I suggest anyone who is interested in Starwood Capital or Barry take a read at it.

Renaissance Man: As Starwood Capital Turns 20, Founder Barry Sternlicht Explores New Paths

Some quotes I found interesting

On Starwood’s investment in Hersha Hospitality Management:

The investment in Hersha Hospitality Management raises Starwood’s profile in hotel management. Its SH Group affilate manages the Baccarat brand and is developing four properties in the Middle East and four in China. Starwood’s investment in Hersha will help that company expand its management portfolio from about 80 properties today to as many as 200 in the next three to five years, Shah said. That growth will come from third-party management agreements, from hotels owned by Starwood funds and from managing hotels acquired by Hersha Hospitality Trust. In approaching such deals, Sternlicht takes the role of a visionary, who masters details without getting lost in them, Shah observed. “He’s a very demanding executive of his team as well as of his investors and his partners.”

On Starwood’s creation of Starwood Property Trust

Starwood Property Trust also marked Sternlicht’s return to the public markets after his departure from Starwood Hotels in 2005. In its mission, however, Starwood Property more closely resembles iStar Financial, the publicly traded investment banking firm that Sternlicht founded in 1998 and chaired until divesting Starwood’s interest in the company five years later.

I always knew that Starwood Property Trust was somewhat modeled on iStar Financial.

Lastly, it’s interesting to me that Sternlicht has some of the same interests as me:

The hotel business, meanwhile, had proven to be tailor-made for Sternlicht’s wide-ranging interests in capital markets, operations, marketing and design

andrew@alconic-inc.com

Not the least, it’s exterior design has been derided since its beginning due to its colors and appearance as someone drives down the Turnpike.

Triple 5, the same company that owns the worlds two largest malls – Mall of America and West Edmunton Mall in Canada – is committing $1 billion dollars to finish the project – and even expand it. I have to say, if there is a company that has the experience and ability to do this, its Triple 5.

Triple 5′s intentions are to use the additional parcels of land adjoining the property that was once to be used to create hotels and office buildings to build an indoor water park, a second parking garage, a skating rink and “other entertainment features that have proven successful at the companies other properties”. If the Mall of America is an example – an indoor water park branded by Nickeloden called Nickeloden Universe, a movie theatre and perhaps an aquarium and an indoor mini golf range.

The NY Times broke the news yesterday and quoted a number of people who have their doubts about the project. I think they couldn’t be anything but wrong – they have New York City only 20 minutes away, a train station literally feet away that has an almost direct ride from Manhattan, and a football stadium which is home to two of the most popular NFL teams – the NY Giants & Jets. With the right management and the monetary backing, I cannot see this project being anything but successful.

Triple 5 is also going to rename the project – American Dream @ The Meadowlands, which is great because it gets rid of the Xanadu name which was really horrible to start with.

One aspect that Triple 5 is also due to change is the exterior of the building. Everyone has stated that the exterior colors is such an eyesore for the project and will actually scare people away. It amazes me that people find the exterior ugly compared to a typical mall or large building which is nothing but huge flat walls with one monotone color throughout. One of the necessary evils of a building like this is a small amount of windows since malls don’t have windows, it’s not an office building or a hotel. No one goes in to look out. I will admit though, the drab wilderness of the Meadowlands that surround the property on one side completely conflict with the colors and design of the building as it stands now. I’m very curious as to what they will come up with as a new design.

With the signing of the agreement, Triple 5 has until the end of this year to close on the transaction, and I think they will be able to do it. And hopefully prove the naysayers wrong.

andrew@alconic-inc.com

Why would they do that?

What company would not want to join up with a highly reputable competitor, plus put some money in their pocket? Have better opportunities due to the association, more money to do transactions with and just go to the next level of the business?

Starwood Property Trust was presenting an unconditional offer for the entire company as long as they did not go through with the share dilution they were about to price the next day. In fact, Starwood was even willing to go through with the pending purchase of mortgage assets from Barclay Capital Real Estate as long as they had 5 days to review the documents. So now Crexus stockholders are burdened with a share price that is lower than it was on Monday.

Honestly, I wouldn’t be surprised if the Barclay Capital Real Estate portfolio was also being pursued by Starwood Property Trust, who lost out on it to Crexus. Starwood then thought it may make sense to just purchase the acquirer, and then along with Crexus’ assets, they’ll get the Barclay assets as well. How else would Starwood be able to do due dilligance on the Barclay porfolio – $528 million dollars worth – in as little as 5 days if they were not already pretty familiar with it?

Whenever takeover attempts fail, the company being taken over always has a rough road ahead of it – it has to perform a little better than it ever did before or else investors and partners will sit back and think – “They really should have sold to such and such” and end up being a much smaller and less powerful company. I hope for Crexus’ sake that doesn’t happen, their stock offering is successful and the Barclays transaction goes through without a hitch – or else Starwood (or another company) may take another stab at Crexus and win, but this time on the cheap.

What do you think? Should Crexus have taken the buyout offer? Will they be able to pull off everything? Let me know your thoughts in the comments or via email.

andrew@alconic-inc.com

Today, according to a press release from Orient-Express, it isn’t Starwood Hotels – but Starwood Capital which is taking over development of the project into a “World-Class Hotel”. So it is still possible it may be a Starwood Hotels branded hotel, I’m crossing my fingers it may be something from Starwood Capital’s hotel portfolio instead.

The press release states that Starwood Capital & Tribeca Associates

..will assume all the terms and obligations of the original contract made between Orient-Express Hotels and the New York Public Library, including the reimbursement of all previous payments made by Orient-Express Hotels and the assumption of all future payments.

After some research into the original announcement and development proposal by Orient-Express back in 2007, the project was described as this:

The five-story building on West 53rd Street will be razed to make way for an 11-story hotel, but the library will own and occupy space on the first floor and underground under the terms of the deal, the two sides said. Five floors of the hotel will connect to the “21” Club on 52nd Street, also owned by Orient-Express.

With:

150 rooms costing $750 to $2,000 per night and a restaurant on the top floor.

The hotel was originally going to be called “21″ based on Orient-Express’s “21 Club” but with the new ownership group, its doubtful it will be a 21, although there still is a chance it may connect to the 21 Club.

I’m eager to see what Starwood Capital chooses to brand this site, as well as a their other recent purchase of 1414 Ave of the Americas only 5 blocks North.

andrew@alconic-inc.com